Dollar holdings of SBP, banks at equal level

KARACHI: For the first time, foreign exchange reserves of commercial banks became almost equal to the holdings of the State Bank.
The Central Bank recorded a large outflow of $368 million from its reserves during the week ended on July 19, and reported on Thursday by the SBP.It makes the countrys case weaker while dealing with the IMF as it attaches strict fiscal conditions to become eligible for $6.5 billion loan.

The reserves of the Central Bank have been shrinking since April 2012; the reserves then were $12.04 billion. The reserves of the SBP never saw improvement since that date. Foreign inflows fell sharply; instead outflows in the shape of repatriation of dollars made the case worst for the country.However, commercial banks showed a brighter picture and their dollar holdings started rising.

The real change was witnessed in December 2011 when reserves of commercial banks rose to $4.15bn from $3.8bn in November the same year.

The most important was that private sector was solely responsible for payment of oil import bill, the largest bill in the list of imports.

In the fiscal year 2013, oil import bill rose to about $14bn, equal to total remittances received by the country the same year.

Commercial banks may continue to meet the import bills for another couple of months, but the Central Bank has been losing ground. Each week it sees a sizeable cut in reserves. The repayment to IMF is causing erosion of foreign exchange reserves which hit the exchange rate hard and the local currency is melting against the international currencies, including US dollar.

Currency dealers believe that the weakening of local currency is a precondition for the IMF loan but no official response was ever shown on this belief.